The Willowvale park is surrounded by high-density, low income suburbs with growing populations. These growing populations, the proximity to the center of the city of Harare, and the need to address the problem of deteriorating services for this important constituency, drove the authorities in Zimbabwe to explore the alternative of public-private partnerships being promoted by SPM and UNDP as a way to address the growing environmental problems of the city. A pre-feasibility study involved 25-30 companies in the park, together with the City of Harare (water supply), the power utility (ZESA), and the local Industrial Development Corporation, alongside five companies physically in the Industrial Park, as well as the Confederation of Zimbabwe Industry. A shadow company has been formed, and a leading German investment and development company (DEG) is funding a full technical and economic feasibilitystudy paving the way, in due course, for a business plan and bankable document, and the creation of a company in which the major shareholders are the government entities participating in the project and a selected number of private companies interested in joining. The Zimbabwe Government, with three ministries signing the original statement of intent, is firmly behind this project, which could be replicated at other existing industrial areas and be used for major new industrial park developments.
OSTRAVA, CZECH REPUBLIC

Ostrava is an example of an existing private company—needing to expand but lacking the resources to do so, looking for financial partners, and being prepared to consider a PPP—combined with keen interest by the public sector in investing in the new partnership. The existing company produces plastic protection for underground electric cables, using recycled plastic from municipal solid waste. There is a fast-growing demand for its products. Three municipalities and 13 towns in the district are interested in participating in a new mixed-capital enterprise because they see the project as a test for possibly developing waste management solutions on a regional basis. Certainly, the opportunities exist along with the need to tackle the problem of substantial urban waste in the area—the legacy of intense industrial activity there. Other private companies are reportedly willing to become involved too.

In the municipality and region of Spisska Nova Ves, a new company, the Spisska Regional Environmental and Energy Company (SREEC), will become the vehicle for PPP. It is a joint venture between the municipality (40%) and a Slovak private company, Pluralité-Mega (60%). Supported by SPM and the Swiss and Canadian governments, SREEC will create subsidiaries, or operating companies, with local and international partners and investors to implement projects in district heating and energy efficiency, forest management linked with housing development, a capacity building center for community development, and solid waste management.

SREEC is a regional business development tool committed to eco-efficiency and PPPs. By combining local investors with international technology companies, it becomes a vehicle for technology transfer. It is a flexible investment instrument capable of responding to local concerns and opportunities.
It was district heating problems that brought SPM into Spisska. Once there, and after discussions with the Mayor and others, new projects began to emerge. SREEC became the instrument for developing these opportunities into new businesses. In all our projects, we create these PPP development companies early in the process. The new district heating company is now operational, with two international investors. The old district heating company has been merged into the new one. Now efforts are under way to replicate the model in the region and in neighboring companies. The housing company project is now under way too.
METAP III: PUBLIC-PRIVATE PARTNERSHIPS
REGIONAL INITIATIVE

The Public Private Partnerships Programme, and SPM, have been retained as the main advisory agent in the implementation of the World Bank/UNDP-funded PPP initiative of Phase Three of the Mediterranean Environmental Technical Assistance Programme (METAP). So far, SPM and UNDP have conducted project-finding missions to Jordan, Turkey, Lebanon, Morocco, Egypt, and Tunisia and have identified urban waste collection and recycling, as well as industrial waste collection and disposal, as just two promising areas.

These missions have shown that while the economic, political, legislative, and operating environments of the different countries inevitably pose problems and challenges specific to each country, the PPP potential throughout the METAP region is significant. By establishing sustainable business partnerships, PPP projects will provide a real opportunity to build on the thorough and farreaching environmental technical assistance already provided in Phases One and Two of the METAP program, and the extremely promising replication and capacity building potential would tie in with other METAP regional activities.
LESSONS LEARNED

SPM and UNDP now have enough experience under their belts to draw some important lessons from the PPP approach.

CHOOSE THE RIGHT PROJECTS

There is no shortage of potential projects for the PPP approach. Early meetings invariably produce a long shopping list of possibilities. The key is to choose the right project, one that meets the criteria set out earlier, and has real commitment from the public and private sectors locally to make it succeed. This is especially important when it is the first project in the country and therefore the first exposure to the new PPP model.

EVERY PROJECT NEEDS A CHAMPION

Ideally in fact, every project needs two champions—one from each sector. High-level local political commitment is particularly important. For example, the progress achieved with the Manizales project owes much to the fact that it had a high-profile champion, the former Governor of the Department of Caldas, at an early stage. But without private sector involvement, the new company could not be a success.

LOCAL SUPPORT IS CRITICAL

Identifying local support has been extremely important to the success of SPM projects to date. The local UNDP office—the Resident Representative—has proved an invaluable ally in leading on the ground by advising on local priorities, contributing contacts, and offering a “visiting card” link to government and NGOs. The collaboration with NGOs can be particularly fruitful. This is certainly the situation with the Southern Centre for Energy and the Environment in Harare and with Fundacolon and ANDI in Manizales.

EACH PROJECT NEEDS HAND-HOLDING ALL THE TIME

Normally, this is an SPM role. SPM’s task is also to find a dynamic, committed local project development manager to ensure onsite follow-up on each project and to keep the momentum going. Otherwise, the project can slip for many reasons associated with the novelty of the process. We really need a local partner, an extended arm of SPM.

PACKAGE THE PROJECTS PROPERLY

Small or medium-sized projects need to be packaged to attract investor interest. Larger projects have their own dynamic. Smaller ones have disproportionately higher transaction costs and political risks. If you add in the innovation of securing eco-efficiency goals and waste minimization, the crucial importance of packaging, brokering, negotiating, persuading, and convincing becomes clear. Current public institutional tendering procedures for smaller projects make little economic sense in terms of both cost and delay. Nor has the process satisfactorily shown that all interests are necessarily fully protected. We have to develop new ways of securing the alleged benefits of tendering without the costs in time and money.

PM\UNDP\ODAs expect to produce some recommendations on this shortly.
THE PROCESS TAKES TIME

There are no short cuts to a PPP project. The host government has to be persuaded of the concept. Projects have to be identified. SPM’s catalyst role has to be understood. The process needs to be explained carefully at the outset. Private investors have to be found. Public and private partners have to be brought together. It is a complicated and time-consuming jigsaw to piece together and it begins with careful groundwork and preparation. But proper preparation is the essential ingredient to the political and economic viability of the project.

RECONCILE DIFFERENT CULTURES

Administration cultures (the public sector) and entrepreneurial cultures (the private sector) are fundamentally different. The former is procedure/process driven; the latter, results driven. Issues like the cost of time delays or indecision can be important barriers to partnership and have handicapped public projects using the old, traditional approach. Yet there is no inherent reason why the public sector should be less efficient than the private sector. The PPP model is designed to cut through this problem by stimulating the public sector into understanding that it shares responsibility, and the cost of issues like delay and indecisiveness.

The public and private sectors have little experience of working together except on the basis of supplier and customer. Normally, they are not working partners who share ownership of, as well as responsibility for, a successful project. The PPP model, in which SPM acts as catalyst, marriage broker, and midwife for the project, provides the vehicle for developing a trust and confidence level that helps to iron out problems and avoid the traditional adversarial posturing between the two sectors. Getting both sides to the table to consider problems together and identify joint solutions is a critical first step. This gives them a shared interest in the success of the new company. Through working together they come to understand each other’s constraints and expectations.

A key step in the process is to get both parties to sign a Memorandum of Interest with a budget and an Executive Committee to manage the feasibility stage. Getting the partners into a legal structure early on in the process, and requiring them to agree on objectives and invest a modest amount of capital up front, is an important test of intent. This process provides three key ingredients: joint ownership, commitment, and management structures Partnership leads naturally into the new operating company.
BUILD A PLATFORM FOR POLICY CHANGE

Shared project experience can become a platform for policy change at the government level. Subsidized services are a case in point. When governments are investors in an operating company, which must pay wages and debt obligations, as well as return a profit, they look at user fees with a fresh perspective.

OTHER PUBLIC-PRIVATE PARTNERSHIPS
CAPACITY BUILDING CENTERS

SPM’s Capacity Building Centers (CBC) initiative brings the public-private partnership model to bear on finding a new approach to capacity building that goes beyond training by integrating technology adaptation and other eco-efficiency services.

Each CBC involves partners from both the public and private sector, supported by the same global network of private companies, scientific and academic communities, international financial institutions (including development banks and agencies), and NGOs that is part of the PPPUE program. The sector-specific CBCs provide practical capacity building programs for large, medium, and small companies and/or industries, focused on eco-efficient principles, practices, and technologies —including technology transfer—and also support the creation and management of small, self-sustaining community enterprises. This approach aims to remove the sources of frustration inherent in current training practices. To train an individual without engaging the employer’s commitment to that person’s future activity is frustrating for the employee. Similarly, to restrict capacity building to the training of individual employees is likely to frustrate employers. To be effective, capacity building must focus as much on the company (or institution) as the individual. More important, the company must feel and have a sense of ownership of the program. The days of free training programs are, or should be, numbered. If it is worth doing, it is worth paying for.
The SPM initiative is being supported by two Canadian entities, Interel and Pluralité International, by the World Business Council for Sustainable Development, and by the International Secretariat for Water. Examples of CBCs are found in Pereira, Colombia, and in Hanoi, Vietnam.
FINANCE FOR MICRO AND SMALL ENTERPRISES

Another SPM initiative within the framework of public-private partnerships is the establishment of two new entities in India to help micro and small enterprises move to eco-efficiency: the Indian Micro Enterprises Development Foundation (IMEDF) and the Indian Micro Enterprises Development Finance Corporation (IMEDFIN), a non-banking finance company. The aim is to leverage eco-efficiency change by micro enterprises, supported and provided by IMEDF, through credit provided by IMEDFIN.

This approach has a number of innovative features:

• Public-private partnerships are central from the outset.

•Credit is linked with eco-efficient technology.

• The focus is on using credit to introduce eco-efficient technologies to the micro enterprise sector to generate surpluses to make the enterprises sustainable.

• Credit will be an important vehicle for achieving vertical and horizontal linkages among the micro, small, medium, and large sectors—for example, through financing the development of ancillaries in the small and micro sectors.

• Credit will be integrated with technical and management support services to ensure business success.

• Commercial and social objectives will be integrated. IMEDF and IMEDFIN will meet a real need in a sector where appropriate market instruments have not been designed. In mobilizing the resources to get them operational, however, we have encountered the view among the public and private sectors, social activists, and NGOs that the small and micro sectors are still a government problem, risk is high while return is low, and there are no opportunities for a competitive return on investment. We need to change this thinking.
NEXT STEPS

The need for urban infrastructure projects is enormous, and the demand for PPP projects is growing among both municipal authorities and prospective private investors. As a result, the Public-Private Partnerships for the Urban Environment program is to be expanded into a second worldwide phase. Under the leadership of UNDP, a Project Development Facility (PDF) is being created to provide the mechanism for identifying and developing more projects. The aim is to raise $10 million in contributions from the donor community to finance the initial phase of 30-50 projects over a five-year period. Some governments have already committed to support the PDF. SPM and UNDP anticipate that within this period the PDF will become self-financing and eventually become an independent corporation operating under the management and supervision of its participating shareholders. The PDF will experiment with a number of activities designed to raise income, such as endowment funds, consultancy services, dividends to the Facility, royalties, and revolving funds.

The new program will retain the key essentials of the pilot phase, including the PPPUE network of partners—governments, NGOs, local communities, academic and training institutions, technological institutes, and of course, the private sector—coordinated by a small, core management team provided by SPM and UNDP.
CONCLUSIONS

The public-private partnership model initiated by SPM and UNDP through the PPPUE program, is fully in tune with Agenda 21’s call for more private-sector participation in reform in cooperation with the public sector. UNDP says that it is “one of the most promising forms of cooperation now emerging for sustainable development.”

The PPPUE program, in particular, has led to four specific innovations:
IT USES ODA TO LEVERAGE PRIVATE SECTOR INVESTMENT

Through a relatively small amount of initial “risk” capital, governments involved in the program can create an attractive opportunity to involve private business at a much more substantial level. A front-end expenditure of development assistance funds to initiate a potential project can catalyse public- and private-sector investments many times greater.

IT ESTABLISHES LINKAGES BETWEEN INVESTMENT AND CAPACITY BUILDING

One drawback of private-sector investments is they lack an enabling environment—human skills, strong institutions, legal framework. So they often fail. Conventional development projects also fail to produce effective enterprises or institutions able to generate sufficient revenues to sustain themselves over time. Public-private partnership ventures link the best investment practices of the private sector with the experience of development practitioners in creating an effective enabling environment with all the supporting mechanisms in place to make the projects sustainable.

IT IS A NEW TYPE OF PROJECT MANAGEMENT

The program is a pioneer in sustainable project management— one that emphasizes eco-efficiency, stakeholder participation, replicability, and a more comprehensive and sustaining approach to development. The focus and priorities are different and so are the results.

Municipal authorities have no experience of what eco-efficient technologies are available, let alone which to choose. SPM, supported by its international network, overcomes this problem by facilitating the identification of the technology choice for each particular PPP project and negotiating the terms of its transfer between the public and private sectors. In essence, the public-private partnership model offers a real opportunity to cut through much of the inefficiency and waste of the traditional approach to urban problems, and provides workable solutions that meet urgent major needs.

Most of the developing world’s cities are under threat from a potentially lethal cocktail of growing social, economic, environmental, and human problems. Even in its expanded role, the PPPUE program can only scratch the surface. But the concept of using a public-private approach to provide business solutions, not aid, to this situation is one that offers real prospects for a breakthrough.